washington journal" we'll have robert draper talking about his latest book that goes behind the scenes of the 112th congress and we'll also have bill rogio who will talk about the expanded authority of drone use by the c.i.a. to conduct signature strikes in yemen and douglas elliott to examine the number of ways the federal government provides grants and loan guarantees to private industries. all that and more on tomorrow's "washington journal". thanks so much for joining us on today's show. [captions copyright national cable satellite corp. 2012]

>> welcome. we have two reporters to help. michelle has the first question. >> let me start up with the time element. the senate passed the bill and beat a deadline. you have negotiated with congressional lawmakers discussing or postponement of

closures. i am wondering what happens may 15 if the house does not act? we are losing $25 million of the day. time is of the essence. that was some of our concern about what came out of the senate bill. we think there are good things. we appreciate the hard work. some of the time elements are concerned because when you lose $25 million per day, they add up quickly. from our perspective, we are looking for action in the house. we hope the house introduces a bill and we have to get through the house and into a conference before the final bill. they're a lot of things to do. our data of the 15th is not a tight date. it is not a shutdown date. the idea of the network changes

we will go very slow and methodically. we have to make sure our customers are ok. we have to be careful from an employer's standpoint that we finally ending spots for them. -- landing spots for them. we will take a timeout in the fall. we will not do anything for the month of october, november, december because you have got our heaviest mail volume time. we will have political mail. we also have the holiday season. then, we start back up after the first of the year. anything that we do will be communicated. we will work through that. we will be very, very careful about not being disruptive. >> we could see closure sometime in the next several months, but not necessarily -- >> not may 15. anything that we do, we will communicate and take the time to share with people so everybody knows what is going on. >> that said, some people have said that given that congress is moving forward with some speed,

you should throw back that moratorium even further. some people think it will be bad faith to move forward on may 15. what is your response? >> from that perspective, looking at what is happening with our finances and looking at what will happen with the bill itself, i mean, there has to be movement on both sides. that is our perspective on this. any changes you make, whether we start them today or in june or july, you have to go through a pretty careful process because you are moving operations from one facility to another. that involves customer coordination. we have to look at all of these things. we have done a lot of homework on this already with some of the service interchanges we oppose. we are keeping an eye on where we are with legislation but, given the fact that the finances are so bad, we have to continue to do our work so that when things happen, we are ready.

>> how often are the numbers fluctuating on potential closures? 3700 was a number that was thrown out. are those numbers changing all the time? are they changing in response to legislation? >> the post office -- the word closure is a word we never use. we have set evaluate, look at, consolidate. serving on a royal level. even changing the hours. so that instead of having eight hours, six hours. we bring in, on average, a revenue of $15,000. the average cost is $65,000. if there is a way that you can match up and bring the cost close to the revenue, there is no need to close. we have communicated that. closure is an interesting word that is all over the news. it gets people riled up.

in some cases, for no reason. we will work through this. we have processes we have with the regulatory commission and we will follow the spirit from a plant perspective, here is the situation. i was in rockford illinois this last weekend the week before i was in montana. i talked to the people. they are actually people. we have excellent people across the organization. the problem is that over the course of the last 10 years, the postal service has reduced the headcount by about 260,000 people. we have reduced headcount more than probably the fortune 50 corporations employ. without any big changes in infrastructure. we are delivering six days. we have 33,000 post offices. we up for its 61 processing facilities out there. we are facing infrastructure problems. we have taken everything out.

35% reduction in headcount and work hours. you have to start making some changes. i was in rockford the other day and we have no volume there. we have the work hours that we use, the time that we use our machines can easily be absorbed in a facility of the line with no problem. no additional cost. then we take the people who work in rockford and we find jobs for them within our system. we are very careful. we have not hired anyone. we aplenty a landing spot. it can be a very fair deal that lets us get our finances in order. >> you want to move slowly after may 15 you said time is of the essence because you are losing $25 million per day. in that period after may 15 before you taking time off, in the three months, how many closings do you see or re- evaluation of the 3700? how many do you think will

close or reduce hours? >> be hour reduction is the best solution -- the hour reduction is the best solution. if we can strike a good media with the cost and with what the customer's need at those locations, we are fine to move ahead. >> no closures -- >> is very reasonable on the smaller post offices that we can work out in a range getting the costs in order and we can keep it open. there are customers out there who have said i would rather you close the place and leave -- to a facilityl that is open 02 hours a day. we are trying to work closely with the customers at the community location because they know better than anybody else what they want. that is why we go there. from a facility standpoint, we have a number of facilities that are on the consolidation list

that have no exposure to customers. their locations are where we sort mail. moving them back upstream to another place where we have got space in we have that equipment, it would be completely transparent to customers. no impact. we have landing spot for the employees. >> that is something that could happen after may 15. >> those are things we have to look at. many ofthe men's -- these would not involve changes in service standards. >> do you think the senate makes changes to the consolidation process? the moratorium on rural post office closures -- closures for election day for both by mail states. all those things and added requirement in the appeals process. how did you feel about that? >> it is problematic. i appreciate the hard work and the fact that they have addressed the overpayments.

we appreciate the fact that they have addressed the retiree health benefit issue. but, putting additional steps into a process that is already burdensome -- nothing do is easy. when you put additional steps in there, it slows the process down and frustrates people. it frustrates me. from my conversations with people in locations like rockered, illinois, the employees know they have to move. let us get going. they understand that. their lives are about where are my kids going to go? will i have to relocate? any concern anyone has when going through this turmoil, our employees see what is going on and they want some closure. customers are saying, if i can still bring my mail to this

side, i will not take any steps. i am ok with that. get these things resolved so i can make changes to my business. that is our issue are around time is of the essence. it is not so much in terms of weeks. it is years. we do not have years. we are losing billions of dollars of year on top of what we have seen on the refunding money. we have to get those numbers up. their plans in place. we need to start looking forward in this industry rather than worrying about the stuff we are dealing with right now. >> there is a house gop bill that you like almost everything in it and there is a big exception. given what happened this week in the senate, did you prefer that approach? >> here is what i like. i think there are good things about the bills. in the house bill, that is really -- they do not cover the

pre funding issue. if you take the language from the senate and were able to get that emerged in congress, that results the short term for us. it leaves the door open for us to also continued to whittle away at those long-term liabilities by negotiating at the great health-care plan with our employees that provide better coverage and also allows us to address some accounting issues and it also allows us to eventually address medicare. that said, you can go from six to five days. if you have delivery door-to- door. we continue to deliver packages. the surcharge will not be a racist -- are regis. >> can i ask about the retiree health benefits because this has been something that has been a very complex issue in something that the unions have been outspoken on th.

you have to refund 100% -- pre- fund 100%. you have two payments coming up and those -- of those are not the first, you'll hit the ceiling. how big of an issue is that for you? is in the senate bill in terms of easing the prepayments. it is not so much in the house bill in terms of changing the schedule. where does the rate on your list of -- >> is the number-one issue. our plan that we put forth a couple of months ago gives us the ability with health care to actually change a profit loss margin. by $7 billion. it is by far the most important thing we can do. that said, the senate legislation goes a long way. it gets us towards a about a $5 billion of the $7 billion deal

and leaves room for changes. we could cover, in a health-care plan owned by the postal service, a billion people. it would be the largest in the u.s. there is no competition in the federal system. if any other company is out there dealing with -- weather is blue cross or united healthcare, they are competing. we think if we get out there and compete, we take at least 10% off the top of what we are spending on health care today. >> you presented this plan to congress at the end of march and it was not very well received on either side of the aisle. do you have confidence you can convince and this is something you should be able to do? >> big changes take time. over the course of time, we have been talking about 6 to 5 day

delivery for a few years and there are people who do not know if they want to do it. 80% of americans say do it. let us go. let us make the changes. health care is the same thing here people do not change plans unless there company changes health care plans. you are comfortable with it and you know what your costs are end its gears people when we start saying we are going to change health care because they immediately think that all benefits will be cut. what we have on our table is an improvement and it saves money. it gives us wraparound for medicare and it will save money and provide better coverage. >> more broadly speaking, your plan involves one that is cutting. there are some unions that say that you are looking at this from the wrong way. you should be growing your business. you are cutting into your own advantages by moving to the five days service. why are they wrong? >> here is the thing. if you take a look at our revenue that we bring in, there

is one thing that is indisputable. first-class mail is still the number 1 revenue generator in our organization. 50 percent of the revenues are in first class. that is on top of a 27% loss in volume over the last four years. it represents 67% of our profit margin that covers everything else, post offices, six day delivery, the entire network. >the blue mailbox mail that you hopefully are paying your bills -- [laughter] that it is a problem. as that shrinks, and it is shrinking at 10% per year, you cannot make up anything else in the short term to make the difference up. that is our whole point. our package volume, priority mail is growing 6% year over year. the whole flat rate package has

been a big time seller. customers love it. a number of companies that we have right now, that has been growing year over year for the last five years at a 14% margin. it is growing like crazy. great growth there. advertising -- there is a big opportunity. you are looking at the big revenue constrain coming through with first-class shrinking on that yearly basis. we cannot make enough over here. we put some things in place. we have a product that we just released in january, to for the price of one. you can now spend -- you can put two ounces of milk that we will charge the same for 1 ounce. the idea there is that we do not want to slow down the diversion of commercial first-class mail. we came out with a product called every door direct.

is very simple. -- it is very simple. you can prepare your mailing online. you can come in and it is a great way to advertise. there are good things. we are looking to get into the digital world. that is an area you have to be careful with because so far, if you look around, there are not a lot of companies that have made money in digital. we do not disagree there are opportunities. we will pursue them. we are open for suggestions. we have to keep in mind that as you lose the volume, you have to make cuts. the funny thing is, some of the same advisers from some of the union's participated in some of the automotive cuts and last time i saw, gm lost four -- 50% of offerings. >> we have less than 10 minutes. if it fits to shift those ideas, do you develop them in house? >> we outsource advertising. the idea came up pretty much

from the fact that we partner with fedex. they provide our transportation for our priority packages and we pay them from a cubic perspective. no matter what the weight is, as long as you -- the price is based on the weight. a person can mail from home. get free pickup. that was a whole idea behind this. if it fits, its chips. >> how much do you pay in advertising? >> this year is $120 million. that is for tv, print, radio, newspaper, the whole 9 yards. that also covers mail. ourl probably seen advertisements. people like that. -- you have probably seen our advertisements. people like that. you are seeing them for every door direct. mail is important. >> how much have these changes in the uncertainty over reform at the postal service affected the milling industry at large?

are you concerned? how are these delays affecting the milling industry? >> that is my biggest concern. they asked me what do you -- what will happen with your finances? i said my biggest worry is the lack of acting in this whole legislative arena. the quicker we get this behind us, the more our customers are assured cash flow. think about our biggest mailers are banks and credit card companies. citigroup, american express, bank of america, if you are starting to worry that your cash flow for mortgages, credit cards as well slowdown coming through the mail, you have a responsibility to figure out what is a different way to do that. i am saying we should be here for the long term. use this for your advertising, your shipping. focus on growing going forward.

>> have house leaders told you they plan to bring a billick? >> i do not know when. we have discussed this. chairman issa said he would like a bill. >> on that note, you say neither bill is good enough. how, but-are you -- >> we want this to last a long time. i think that between what is in the senate bill and what is in the house bill, there could be a very good compromise that gives us the ability to address the health care and the infrastructure. we will take care of the other things like the personnel costs. we need to increase costs by $20

billion by 2015. that is doable. we can do it without having any major negative impact on employees or customers. we have been very careful. we have 155,000 people that can retire right now. all the talk of those people going to be laid off, 155,000 can retire today. another 100,000 within the next five years. if we put the plan in place, we know how to move people off the roll in a fair way. >> its first class continues to go down at the rate is going, -- >> is all in the plan. >> you think he would be able to not have to come back and say, we need to look at this again? >> it is all in the plant. the key thing is is having flexibility. -- the key thing is having flexibility. six to five days is worth about

$3 billion in cost reduction. the rest of the infrastructure -- there is another $5 billion in there. there are big opportunities to change. what it does is it sets you up with a much more efficient and a much smaller base is going forward. between product pricing, staying at the cpi and introducing additional opportunities to generate revenue, we think that we can maintain close to $1 billion profit margin going forward. that is the key thing. >> talk about how washington works. after may 15 if you decide we are going to close this rural post office in seoul and so's district, what happens next? any changes we make, we would tell people exactly what was going on, show them why we have to make the changes and continue

from there. we have done a lot of that already. we have to put in and. -- and say, here is the financial issue, here is what we can do from a service standpoint so that people understand there are plans to hear and we carry them out. it is an emotional issue. i mean, we are happy is an emotional issue because people still care about the postal service. our biggest concern would be if we are making changes and nobody gets upset about it, we would have a lot to worry about. we communicate up here. we communicate with our employees and with customers. we will listen to them. we have been very good with that with a lot of changes. you do not make the changes we have art made and continue service levels without listening to customers and employees. >> he said big changes take time and i am wondering how much time you have. the annual financial report that came out last year estimated that you could hit your $15 debt

ceiling at the end of this fiscal year. you said you probably will squeak by this year and maybe next year hit the ceiling, would change in that. -- how does your is it you will 80 fault? >> we will not hit pre funding. this year, we will -- we are ahead of our revenue projections on plan. under where we were last year. we have taken additional costs. even with no changes this year, yournd up with 30,000 fr employees. that continues even with no big changes. by doing that, we increase revenue. uxor the cost. that gets us to a point where our cash is ok through the fall and into late next year. at and on our focus is a result is so that from an industry standpoint, we can look forward and not worry about this.

>> we have time for one or two or questions. >> you said you what legislation done this year but it sounds like changes take time. when is a drop dead date the legislation needs to get done? >> things take time. in terms of implementing so that you do not upset the applecart. in time, in my world, weeks and months. he is nine years and many years. we would love to be in a situation where we had meaningful legislation by the end of may. i know that is a big asked. -- ask. >> something negotiated by the house and the senate? >> the senate moved quickly. we would like to see the house moved quickly. $25 million is a lot of money a day. we would love to see a situation like that have been. so we can get these things into place and get focused on growing

the industry instead of worrying about what will happen. >> the house passed its bill six months ago at a committee level and they are not doing anything. from november until april, -- how can you believe they will get something done? >> let us see what happens. i know there a way for the next couple of weeks. there is nothing that says the bill could not come up on the floor. if you remember the last postal legislation in 2006, it happened very quickly. very quickly. within three or four days. not to say that this will happen that quickly again, but, you asked the question and i would like to have it. >> have they told you things

that make you confident? >> not at all. we have talked to both the house and the senate, as well as the administration and that our message consistently is that we need to move on these things and get this done. we need to look at the future rather than concentrating on the problems at hand. >> we will be waiting and watching. thank you for being part of our "newsmakers became postmaster general -- "newsmakers." postmaster general. may 15 deadline? >> we saw them try to downplay that date. the origin of that date was in december, he met with senators to convince him to postpone any plans on closures. until they could have some time to work out a bill. now, we see the senate has passed the bill. the house is working on theirs. may 15 is dl